About me, Finances, Goals

Financial update: August 2019

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This month: Big savings rate boost, bond fund purchase, and closing in on my ISA limit.

Hm, there’s been an unusual amount of positive movement in my financial situation given that nothing has changed with work! Most of it admittedly will take effect in next month’s pay, but you know, I’m too excited (you know, in that FI way) not to mention it now!

The biggest plus is that our 30 hours free childcare is starting now. Honestly, we couldn’t wait for this moment at the time we were paying a very high mortgage! Now, I could potentially up my savings rate (SR) by 12.9%! (Approximate as I don’t know yet what my new take-home pay will be -see below.) The cost of early childhood is loosening its hold on us as Little Firelite is getting bigger (*a mix of relief and anticipatory nostalgia*).

A few other things will make incremental improvements to my take-home pay: my salary has apparently increased by around 1.9% (still firmly in the basic rate bracket), an error with my childcare vouchers will in effect save me some dosh in the future, and my pension contribution increases (2 due) will be a bit smaller than originally ‘billed’. I also gave a talk outside my normal work that pays a lucrative £83 for the hour, but this tends to happen very occasionally!

Investment update

Each month, I will post (1) a financial update and (2) a page updating on my Life 1.2 (midlife gap year) preparations, which you can find here. NB: I’ve edited below to reflect month-end accounts, whereas before I was ‘projecting’ savings for the month ahead based on what I ‘paid myself’ first (ie. put aside). So, now I’m talking about saving for the month that’s gone.

So, I’m inching closer to my 100k goal! Having since worked out August’s actual savings rate (not the projected one that I used in previous ‘savings rate’ calculations that I averaged along with 3 previous months’ actual savings rates), I’m pleasantly surprised! I managed to put away a few hundred more than expected as I had few major spends or special occasions this month bar the long weekend away. This is offset slightly by my index funds having dropped a little (with some recovery). Still, I’d be surprised if I can hit £100k by Christmas (the goal), probably more like Feb. But if I did somehow keep up this savings rate (and my investments not fall further!), it’s tantalising to entertain the idea that it could happen.

August July
Cash accounts 45000 £47000
Cash at 2-year+ fixed rates 28200 £28200
Tracker funds (ISA) 12700 £13000
Bond index fund (ISA) 4000
Peer lending 3200 £3200
Total FI stash (see here for pension and other assets) 93400 £91,700
August savings rate: 66% (including workplace pension)

The only investment change I made this month is that I’m now a bond girl! Well, a bond fund girl (less catchy), at least. I may write a post on this soon. I was considering a blended fund for a while, like one of the popular Vanguard Lifestrategy Funds or a target retirement fund, which invests a proportion into the bond index as well as other securities and a proportion into equity indices. However, I decided to keep things ‘pure’ for transparency and rebalancing against the rest of my portfolio. This fund also keeps management costs down a little (0.15% compared with something like 0.24% for the ‘blended’). My intention is to keep something like a 25% bond / 75% equities split– at least until I get my head around the bond market in relation to other markets.

My other goal was to fill my ISA allowance; I’m almost there on account of my new bond exposure. I was strongly considering upping my investment into the Vanguard Pacific Ex-Japan Stock Index Fund, as I’m keen for my portfolio balance to reflect world market capitalisation – China is at 7.5% (see table below) – the third largest country for total stock market value in the world. In my humble basket of funds, China accounts for 4%. Or so I thought, until I then recalled that the Chinese representation in my emerging markets fund is strong (31.8%). Emerging markets represent a ‘risky’ 9% of my portfolio. I am of the view that this is where we’ll see strong growth over the long-term, though it is perhaps unsurprisingly more volatile.

2019 figures (Lexingtonlaw.com)

The fall in the market has been bouncing back slightly so I wasn’t going to hold any longer. The only thing stopping me getting the ISA fully invested right now is not being sure which fund to ‘top up’. I already have a strong US presence (44%), and I don’t think adding more new index funds at this stage is very practical. The FTSE is going to be in for a ride over the next months, I imagine. I do have home bias at 20%, relative to market capitalisation (4.5%). Not looking to increase really as I’ve no idea how warranted the home bias is – Having said that, the pound will probably take even more of a pounding soon what with Brexit. Interesting times.

The other thing that’s been on my mind over the last weeks is ethical investments. I’ll be reading into this as I try to navigate how best to maximise investment growth while considering my values. It’s all looking pretty murky. But hoping to find some balance there within my portfolio. I’ll be doing a post on that. 🙂

Reflections and financial goals

After a busy summer including North African and European breaks, I’m pleased that my savings rate wasn’t hugely affected, partly by cutting back in spending elsewhere and “breaking up” costs using my credit card over a 2ish month interest-free period. Okay, I must admit, one month I only saved £372! (Also, I paid £140 for a festival which was cancelled and just got back this month. 😛 )

With all the other changes going on in my finances, this month is the one in which I work out my new savings rate goal. I anticipate higher spends in September due to birthdays, mostly. It’ll be interesting to see if I manage a 60-70% savings rate given the positive changes I mentioned earlier, most of which will take effect at the end of the month.

So, my new most immediate financial goals

  • To get to £100k net worth by the end of the year (still nudging away!)
  • To figure out a target savings rate that I am comfortable with 😊
  • To read into ethical investments
  • To fill my ISA, possibly including an ethical investment or otherwise top up my fund

Thanks for reading. 🙂 Have a good September!

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